Hollande: Conditions ‘not there yet’ for EU budget deal

Hollande Monti.JPG

President François Hollande said yesterday (3 February) that France was keen to agree the European Union's 2014-2020 budget at a summit in Brussels later this week, but there was still much work to be done.

"We will do everything to find an agreement at the next summit, but conditions are not there yet," Hollande told reporters, flanked by Italian Prime Minister Mario Monti.

At a meeting in November, the 27-nation bloc failed to agree on its €1 trillion budget for the next seven years (2014-2020).

>> Read: EU budget delay keeps pressure on UK over banking union

Hollande said there was still time to reach a deal before the two-day summit starts on Thursday (7 February).

Monti said he hoped a deal could be found on the basis of a package that European governments discussed late last year.

"I hope that the system that will follow will be fairer," Monti said.

Monti wants a reform of the EU system of rebates, arguing that Italy's contribution to the budget is out of proportion to its real wealth. Some net contributors, such as Britain, have demanded deep reductions in EU spending plans.

Concerns over strong euro

Underscoring a turnaround in investor sentiment towards the eurozone, Hollande also voiced concern about the recent strengthening of the euro against the currencies of major trading partners.

"The markets have welcomed with magnitude, with excess, via the level of the euro, the confidence they place in the countries that make up the eurozone," he said.

In the meantime, German Chancellor Angela Merkel said on Saturday in her weekly podcast that she expected very difficult negotiations.

"Germany will try to contribute to a result. We will only be able to see at the end of next week whether it succeeds," she said.

"But it is worth trying," she said, adding that at a time when many European countries are struggling with economic growth, an EU budget deal would give certainty for financial planning.

She said the budget must be used to make sure the EU increases its competitiveness and that member states' economies become gradually more aligned.

In preparation for the summit, Merkel is holding a round of talks in the coming days. Spanish Prime Minister Mariano Rajoy is due in Berlin today (4 February) and she is to visit Hollande on Wednesday evening.

Rajoy on Saturday denied wrongdoing in a growing corruption scandal that threatens his credibility just as he makes headway against economic crisis.

>> Read: Secret payments scandal weighs on Spanish PM Rajoy

Merkel had struck a more positive note last week at a news conference with Monti, saying she was very optimistic about a deal.

The euro last week reached its highest level in 14 months against the dollar and in 33 months against the yen.

A strengthening euro would weigh on exports from eurozone countries, as well as reducing the cost of imports.

The European Commission proposed a draft budget for 2014-2020 which represents a freeze in spending in spite of the Union having gained new competences under the Lisbon Treaty.

The Cypriot presidency tabled a proposal, flatly rejected by the Commission and the Parliament. Then followed another proposal by Council President Herman Van Rompuy.

The 22-23 November 2012 summit ended without an agreement, as some leaders reportedly tried to slash further Van Rompuy’s latest budget proposal (of €973 billion) by an additional €30 billion.

EU leaders are expected to have another summit on 7-8 February with the objective of agreeing the 2014-2020 EU budget.

  • 6 Feb.: Merkel meets Holland in Paris to prepare the summit on 7-8 February;
  • 7-8 Feb.: EU leaders meet in Brussels to tray to agree the EU budget for 2014-2020

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